Merger of Sage and Pegasus cancelled

Accounting software developers Sage and Pegasus have called off merger talks after legal advisers warned that the deal faced referral to the Monopolies and Mergers Commission. The tie-up would have given Sage more than half of the SME market for accounting software and around 35% of the market as a whole, according to independent estimates.

Analysts described the end of talks as ‘good news’ for end-users. Jyoti Banerjee, managing director of Tate Bramald Consultancy, said: ‘Users are the only people who stood to lose out, because the deal would have reduced competition.’

Pegasus, which rejected an offer from Sage in August, began serious talks after Sage upped its initial proposal to 475p a share, valuing Pegasus at u31m.

Pegasus’ chief executive Jonathan Hubbard-Ford said the revised offer had not fully reflected the ‘marriage synergies’ of the tie-up, and withdrew from negotiations after his lawyers warned of a MMC challenge.

‘A referral would have put the bid on hold and there was no compulsion on Sage to come back with the same offer afterwards,’ said Hubbard-Ford. ‘Our dealers would have watched us sell out to Sage and the deal might not have gone through. What sort of message would that have sent them?’

Sage’s chairman David Goldman expressed disappointment at the end of the talks. ‘We have no plans to talk to Pegasus in the near future,’ he said.